Jeremy Peat
GOODNESS knows how many times I have said that boring Budgets are best.
When there is nothing special to do then doing close to nothing makes sense. The Chancellor duly did very little, but this was not a wholly boring session as “Spreadsheet Phil” actuallyrelaxed and had fun – largely at the expense of “the party opposite”.
The content may have been largely dull, (albeit with sparks of interest) but the delivery was remarkably effervescent.
This was pre-announced as Philip Hammond’s last Spring Budget. The expectation was that any fireworks would be kept under wraps until the autumn, given that Autumn Budgets were to be the key annual events going forward. Consequently, the interest was as much in the Office for Budget Responsibility (OBR) forecast as in the detail of Hammond’s speech and the plethora of associated papers.
As expected, the OBR raised significantly its forecast for GDP growth for the coming year, from 1.4 per cent to two per cent. But at the same time they nudged down their forecast for the subsequent years, given Brexit-related uncertainties. They also edged up the forecast for inflation, but at its peak expect the index to be only marginally above the two per cent Bank of England target. The forecast also suggests an increase each year in real household incomes. All forecasts, even from the OBR, are subject to uncertainty and in this case the outcome may prove to be somewhat higher than anticipated inflation and hence little real income growth.
The public finances look to be in better health. The OBR now expects the level of the UK’s debt to be lower in each year of the forecast than was the case last autumn, with the deficit also down, and expected to duck below one per cent of GDP by 2020/21. But the Chancellor resisted the temptation to use any of the extra dosh, building up his Brexit reserves – just in case all is not as smooth as the Brexiteers tell us it will be!
This was all sound and solid good news; and The Chancellor was also able to state that employment in the UK is at “an all-time high” and unemployment at “an 11-year low”. However, he did admit to two key weaknesses. First he saw productivity growth as “still stubbornly low”; and secondlyhe referred to far too many entering the labour force without the required skills. His responses to these two weaknesses will not apply directly in Scotland, but there could be examples to follow. On productivity he allocated extra funds to new technologies and transport infrastructure.
Re skills, he accepted that the UK was close to the bottom of international league tables so far as technical education was concerned. He sought a “parity of esteem” between higher and further education, with more support for apprenticeships and lifelong learning.
The Scottish Government will benefit from some extra funding as a consequence of increases in programmes restricted to England or England and Wales. It would be good to see similar acceptance of the weak productivity performance, with consideration as to what infrastructure spend is most needed and how a move to “parity of esteem” could be stimulated north of the Border.
Our further education sector merits more support, and encouragement, both to help young people into productive jobs and to enhance the scope for raising productivity. across Scottish business.
The only news of direct Scottish interest was the scheduled examination of how to achieve, via tax incentives and other measures, the maximum exploitation of the remaining North Sea oil resources. Maximising output from this increasingly scarce resource will require transfer of activity from large companies to smaller ones. We now await a discussion paper and the establishment of a panel of experts.
The spring 2017 Budget will rapidly fade from our memories. Not so with the productivity problem. We should look forward to further measures in Scotland, specific to the causes of low productivity in our economy.
Jeremy Peat is visiting professor at at the University of Strathclyde International Public Policy Institute
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